FARE4000 - Winter 2024 - Assignment 1

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University of Guelph *

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4000

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Economics

Date

Feb 20, 2024

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DEPARTMENT OF FOOD, AGRICULTURAL & RESOURCE ECONOMICS UNIVERSITY OF GUELPH FARE*4000: Agricultural and Food policy Winter 2024 Assignment #1 ( Due February 16, 2024 via dropbox ) ______________________________________________________________________________ INSTRUCTIONS This assignment consists of five questions and 85 marks . It is worth 20% of your Final Grade . ______________________________________________________________________________ Question 1: Total Marks= 20 A beef processing firm in Ontario is considering two options: (a) Upgrade the existing plant , (b) Establish a brand new processing facility. The CEO of the company believes that she can break-even under options (a) and (b) if the demand for beef grows by 6% and 9% respectively over next 10 years. The CEO has the following information at her disposal:  Own-price elasticity of demand for beef = -0.90  Cross-price elasticity between price of pork and demand for beef = 0.15  Cross-price elasticity between price of chicken and demand for beef = 0.10  Income elasticity of demand for beef = 0.75 The price of beef is expected to increase by 10% over the next 10 years, while the price of pork and chicken are expected to decrease by 10% and 15% respectively. Disposable personal income is expected to grow by 5%. A. Which option would you recommend to the CEO? Explain showing all calculations and assumptions B. Assuming no change in pork or chicken prices and income, how much would beef prices need change in order to just break even on each of option a) and b) 1

Question 2: Total Marks= 20 Pick two different types of market failure and outline an example of Canadian farm policy designed to correct that market failure and your initial assessment of the success of that policy. Question 3: Total Marks= 25 Explain the significance of each of the following on Canadian agricultural policy:  Joint federal and provincial responsibility for agriculture in the Constitution  The General Agreement on Tariffs and Trade/World Trade Organization  Regulated marketing  Cheap food policy  Cash accounting Question 4: Total Marks= 10 A University researcher has asked you to comment on the validity of their supply response analysis for a variety of Ontario commodities. Explain for each example below. A. The estimated short run supply elasticity of wine grape production in Ontario is 4.0 B. The estimated short run supply elasticity of corn supply in Ontario is perfectly elastic Question 5: Total Marks=10 The Ontario Minister of Agriculture and Food wants the federal government to eliminate the AgriStability program. Describe the process required to make this change happen. 2

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